BUSINESS LIVE: Boohoo sales slump; AstraZeneca to pay $435m settlement; Greggs revenues soar

Josh Warner, market analyst, City Index:

“It will be a difficult update for investors to swallow as it ultimately means it will take longer than expected for Boohoo to improve its fortunes.”

‘The company was right to clear inventory, but sales are now expected to fall by double digits for the full year and it has signaled that Ebitda is also at risk of falling too, having previously signaled that both measures would grow.

‘That suggests Boohoo is in a similar position to rival ASOS, which revealed last month it also shifted more stock than expected but also cut its forecasts as sales remain under pressure.

“Investors may fear that the challenging economic outlook could cause further problems for the pair in the future, as signs of a pullback in consumer spending have already affected the pair’s guidance.”

Matt Britzman, equity analyst at Hargreaves Lansdown:

‘The beloved bakery chain continues to delight. Greggs is starting to gain quite a reputation for delivering solid results, and today’s update certainly hasn’t bucked that trend.

‘Once known for its sausage rolls, Greggs has worked hard to expand the menu while maintaining its core value offering. Meanwhile, expanding delivery service (like the new partnership with Uber Eats), click and collect options and later opening hours make it easier than ever to get your bakery fix.

‘Inflated costs are starting to decline, giving more room for maneuver in prices during the second half. Don’t be surprised to see a slight cooling effect on comparable sales from here, dating back to periods last year when prices rose.

‘However, it is a long-term win, as less pressure on costs makes it easier to keep prices under control and retain that coveted value proposition.

‘The bears will argue that the valuation doesn’t leave much room for error, and they would be right. But with good food comes even higher expectations, and Gregg’s broadening shoulders seem strong enough to handle the weight.

Greggs has maintained its full-year outlook after underlying sales rose in the third quarter and gained market share, demonstrating the resilience of the baker’s value proposition in a cost of living crisis now in its second anus.

Greggs also said on Tuesday that the rate of cost inflation had slowed when annualizing the significant commodity-led increases seen in 2022.

The group’s sausage rolls, baked steaks, vegan snacks and sweets have resonated with Britons whose incomes have been hit by high inflation. Its shares have risen 45 percent over the past year.

Greggs’ comparable sales at company-run stores rose 14.2 percent year-on-year for the 13 weeks to September 30, its fiscal third quarter, after rising 16 percent in the first half. Total sales increased by 20.8 percent.

AstraZeneca will pay $425 million to resolve product liability litigation against acid reflux drug Nexium and heartburn drug Prilosec in the United States, the pharmaceutical giant said on Tuesday.

The settlements effectively resolve all pending lawsuits filed against the company for failing to warn patients about the risk of contracting chronic kidney disease and related problems, except for one in Louisiana, said AstraZeneca, whose trial is scheduled for April next year.

The company added that it has made a provision to pay the settlement.

Embattled online fashion retailer Boohoo has warned that full-year revenue could fall by up to 17 per cent from 2022 levels after a slower recovery in sales volumes.

The group reported that pre-tax losses widened to £26.4m in the six months to the end of August from £15.2m a year ago.

On an underlying basis, it swung to a pre-tax loss of £9.1m from profits of £6.2m a year earlier.

John Lyttle, group chief executive, said:

‘During the first half we have made substantial progress on key projects and initiatives, including the launch of our US distribution center.

‘We have seen significant improvements in sourcing lead times and invested in pricing to reinforce our value credentials.

‘We have identified over £125 million in annualized cost savings supporting our investment programme.

“Our confidence in the medium-term prospects for the Group remains unchanged as we execute on our key priorities where we see a clear path to improving profitability and returning to growth.”